Budget 2018: What Morgan Stanley MD Ridham Desai Expects

Watch Morgan Stanley’s Managing Director explain this year’s Budget and what to expect from it.

The government expenditure is expected to increase on Railways, Infrastructure and Rural sector this year.

(Photo: The Quint)

What are the most important factors that needs to be looked into this year’s budget?Managing Director of Morgan Stanley, Ridham Desai, tells The Quint all about it.

What’s the Most Important Factor in Budget 2018?

Budget is a balance sheet of Government’s income and expenditure. The difference between the two is called ‘budget deficit’. The most important thing about this is to know where our fiscal deficit goes. For the last 3 years, the Modi government has been reducing fiscal deficit of the country. It was more than 5% when he took office in 2014 but now it is estimated to have reduced to 3.2% in 2017-18.

The government’s income is expected to be lesser this year because of GST. So, the fiscal deficit is expected to increase to 3.4%.

Government spending increased by 9% last year. Desai says it will increase further by 15% in the next 12 months. But the money spent will be used for infrastructure and the rural sector.

What Will the Government Spend On?

Desai says an increased expenditure is expected this year. It will be spent on railways, highways and powers sectors. The rural sector will be another that will see increased expenditure.

What Will the People Gain from the Budget?

Desai says that reduction in taxes is one thing the people keep expecting. But, he says, there will be less reduction in tax because the government does not have much flexibility this year. Tax deduction will not be the government’s focus.

The share market is speculating on Long Term Capital Gains (LTGC). But he believes that LTCG tax is not being introduced this year.

What Are Long-Term Capital Gains (LTCG)?

If a shareholder holds shares for more than 12 months, an LTCG tax, which is at 0%, is imposed. There is a possibility that the holding period is increased to 2-3 years this year, but that may not impact the market much. He advises retail investors to indulge in systematic investment.

He says that global markets may slow down soon. And if that happens, there will be slowdown in India too. India will not be able to perform any different from the global market. It will be impacted if the global returns decrease.

Video Editor: Sandeep Suman